SEC Grants WKSI Waiver

The SEC granted a waiver to a European bank from ineligible issuer status. The bank’s ineligibility was triggered by its criminal conviction for manipulating LIBOR in order to maintain its well-known seasoned issuer (“WKSI”) status.

The SEC explained that under Securities Act Rule 405, a firm’s WKSI status is automatically revoked because of its criminal misconduct absent a waiver from the SEC. In the SEC’s waiver order, the SEC determined that the bank “made a showing of good cause” and so would not be considered an ineligible issuer if it complied with the terms of a plea agreement.

SEC Commissioner Stein issued a dissenting statement regarding the SEC’s decision to grant a WKSI waiver to the bank, and asserted that the waiver “confers on the largest companies certain advantages over smaller companies.”

Lofchie Comment: The regular granting of waivers from statutory disqualification shows that the securities laws should be amended. Instead of being imposed on a WKSI automatically unless a waiver is granted, a disqualification should be imposed only where the SEC finds that it would serve a purpose. If the firm that violated the law has been adequately punished, then it is illogical to pile on an additional penalty for an unrelated activity.

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